Standing Committee D

[Mr. Alan Hurst in the Chair]

Commonhold and Leasehold Reform Bill [Lords]

Clause 69 - The right to manage

William Cash: I beg to move amendment No. 67, in page 33, line 12, at end add—
'(3) But this Chapter does not apply to any part of a building which is not occupied, nor intended to be occupied, for residential use'.

Alan Hurst: With this we may discuss the following amendments: No. 52, in page33, line 21, at end insert ', and
(d) no part of the premises are let on a tenancy to which Part 2 of the Landlord and Tenant Act 1954 (c. 56) (business tenancies) applies, provided always that planning consent has been granted for such business use or that deemed planning consent for such use exists.'
 No. 53, in page 33, line 21, at end insert— 
'( ) But this Chapter does not apply to any part of a building which is not occupied, nor intended to be occupied, for residential use.'
 No. 68, in page page 96, line 35, leave out paragraph 1.

William Cash: We now move on to leasehold reform. I welcome the Parliamentary Under-Secretary of State for Transport, Local Government and the Regions, the hon. Member for Northampton, North (Ms Keeble), and I look forward to our discussions. I am sorry that the Parliamentary Secretary, Lord Chancellor's Department has disappeared, but he will no doubt reappear on Report.
 The positions on leasehold reform and commonhold are quite different, but it is convenient to deal with both matters in the Bill. Both sides in the House of Lords agreed that there was a problem with mixed-development buildings and that it was not appropriate for residential tenants to manage the commercial parts of such properties. 
 Commercial tenants expect premises to be professionally managed. Furthermore, the landlord's interest in the management of the building is more intensive for the commercial parts than it is for the residential parts. The residential parts must, of course, be kept in good repair, but there is rarely much dissension about what is required, and most disputes are about timing and cost. Decisions about commercial premises, on the other hand, must be taken on a much more commercial, diligent and, some would say, pro-active basis. The landlord is under an obligation to decide which works must be undertaken to make the premises attractive to new tenants. What is more, where he is under an obligation to repair, commercial tenants will be much more demanding than residential tenants who must bear repair costs 
 through a service charge. That problem was recognised in the other place and is probably accepted by all those involved in such issues. 
 The main argument of the Minister in the other place was that the amendment would mean that landlords could get round the residential tenants' right to manage by converting small parts of the development into business premises. He gave the example of a landlord who converted a broom cupboard into an office and an attic into a factory. I am not much convinced by that argument and I trust that the Minister will not simply trot it out again. It is obvious that converting a broom cupboard into an office would require planning permission and I would like to see someone try to install a steam hammer for metal pressing in someone's attic. 
 There is a risk that a landlord will seek to convert part of a block of flats into commercial premises, but that will occur in only a few cases. We must accept that, on the whole, residential blocks are not suitable for converting into premises that can be used for business or commerce. I am sure that the Minister would agree, although she looks a little uncertain. For my part, I find it difficult to disagree with that proposition. 
 Lord Whitty said that clause 94 meant that commercial parts would not be subject to the right to manage. However, the clause is extremely opaquely drafted, dense and difficult to comprehend. If responsibility for the commercial parts is intended to be the landlord's obligation, the clause does not say so. Moreover, it leaves demarcation disputes very much in the air. 
 Will the Minister explain what is meant in clause 94 by the phrase 
''functions with respect to a matter concerning only a part of the premises consisting of''?
 Does it refer to a commercial unit? A standard issue that arises with shops on the ground floor of mixed developments is the frontage and the type of advertisements that can be displayed. After the right to manage has been exercised, will the landlord or the right-to-manage company be responsible for such matters? 
 It was suggested in the other place that landlords should be given 999-year leases of the commercial parts. There is something to be said for that and I shall be interested to see whether Liberal Democrats on the Committee take a similar view. The proposal would be a productive way forward, but Lord Whitty did not respond to it. 
 The Government's proposals for mixed developments will lead to great difficulties and, some might even say, disaster. The only practical solution to the problems that I have outlined is to exclude mixed developments from the scope of the automatic right to manage. That would not put residential tenants in a difficult position with bad landlords, because the present right to manage would still exist. 
 That is all that I need to say at this stage, and I look forward to the Minister's reply.

Sally Keeble: This is the first opportunity that I have had to speak, although I have obviously attended the Committee previously. The part of the Bill for which I am responsible is important and very detailed, but I am sure that we shall make good progress under your chairmanship, Mr. Hurst.
 The amendments relate to the application of the right to manage mixed-use properties, as the hon. Member for Stone (Mr. Cash) said. If I looked a little quizzical when he talked about turning broom cupboards into offices, it was because the image of several hon. Members' offices in this Building flashed before my eyes—[Interruption] I have clearly struck a chord. 
 The right to manage is intended to allow leaseholders who have a majority stake in a property to take over the management of that property. The amendments would have precisely the opposite effect. They would prevent leaseholders who had acquired 99 per cent. of the property on long leases from being able to manage the block merely because the remaining 1 per cent. was subject to a business tenancy. 
 That would open up a serious loophole on which unscrupulous landlords would be eager to seize. I appreciate that the hon. Gentleman said that he did not regard that as a sufficient obstacle, but it is a substantial one and it is part of our argument against the amendment. The landlord could frustrate the right to manage by letting a small part of his property on a business lease. It must be remembered that business leases extend way beyond factories, possibly to professional activity. Many people work from home and they could be interpreted to be business tenants. The practical effect of the amendments would thus be to allow landlords to put any property that they wanted outside the right to manage. I accept that that might not be the intention, but that is what would happen. 
 We have looked long and hard at how best to apply the right to manage mixed-use properties. However, problems would be encountered in any attempt to impose a statutory division of management responsibilities in an interdependent block. We have reflected hard on those problems, but still find them intractable. The fundamental difficulty is that responsibility for the fabric of a structure as a whole, and for related matters such as insurance for the structure and for any parts or services common to the domestic and non-domestic sections of the block, could not sensibly or realistically be divided between the two parties. It would leave the landlord responsible for the fabric of the property. 
 Only responsibilities that related solely to the interior of the domestic parts and any common parts exclusively associated with them would transfer to the right-to-manage company. In most cases, that would be of little use or benefit to the residential leaseholders, because all the major management decisions and most costly aspects of management would remain with the landlord, who would continue to recoup costs from leaseholders through the service charge. The right to manage would in effect be weakened because 1 per cent. of the property was a business tenancy, or could effectively be classified as such. 
 I appreciate that the amendments may stem in part from concern that the RTM company might lack the motivation and expertise to manage the non-domestic part successfully. I stress that under the Bill there would be no question of the RTM company becoming involved in the commercial relationship between the landlord and his business tenants. Clause 93(6)(a) explicitly reserves to the landlord all management functions that relate exclusively to units that are not leased to a qualifying tenant. Although the problem is difficult, we remain satisfied that the Bill's approach is the best solution available.

Adrian Sanders: I wonder whether the Government have any mixed developments in mind. Are they putting barriers in the way of developments in which there would be a mix of right-to-manage tenants and businesses? Throughout the Bill, it seems as though the Government want everything to be clear cut, with residential and business properties seen as separate. Does the Minister see that there could be an enormous number of mixed developments and that they ought to be encouraged?

Sally Keeble: There has been careful discussion and consultation on all aspects of the Bill with all the parties involved. As will come out in our debates on this part of the Bill, we have often had to strike a balance between competing and sometimes conflicting priorities. Although there may be a discussion about our judgment, we feel that the balance is right and that our system is workable and will provide residents with what they require. It will not deter developers.
 The right to manage is intended to allow leaseholders to gain management control of properties in which they hold a majority stake, but where the landlord holds a monopoly over the management. Where, therefore, the developer has set up proper communal management arrangements from the outset, there should be no need for the right to manage to be exercised. We are aware that enlightened developers take that approach already. Leaseholders are often given a right to manage their blocks, or, if it is a mixed block, the residential parts, through a resident management company, which is written into the leases. 
 On the points about developers raised by the hon. Member for Torbay (Mr. Sanders), it is much easier for the developer of a block to put in place, at the outset, appropriate arrangements tailored to the precise circumstances of the building and to ensure that the relationship between the management responsibilities for the residential part and for the block as a whole is sensible. If that is done properly, the leaseholders will already be able to manage their own homes and there will be no real incentive for them to exercise the right to manage. 
 Developers can take a similar approach when they wish to protect themselves from the prospect of enfranchisement. Furthermore, the Bill will provide the opportunity for commonhold development. That is an important point, which is, as the hon. Gentleman said, often missed by those who have raised concerns about mixed-use development. Commonhold will necessarily involve both outright ownership of 
 individual units and a share in the common management from the outset. The rights to manage and to enfranchise will not be needed and will therefore not apply. The developer of a commonhold will consequently be certain from the outset about what will happen to his investment and will not face the prospect of losing the management or ownership of the commercial units. 
 The operation of commonhold or comparable systems in other countries does not seem to have inhibited mixed-use developments there. Furthermore, some developers with experience in such countries have expressed an interest in commonhold development once it becomes possible in England and Wales. 
 In the light of those considerations, the concerns that have been expressed about mixed use are misplaced. Developers who make sensible use of the options open to them have nothing to fear from our changes and have no rational reason not to continue with mixed-use developments. We acknowledge that there is a need to help developers to understand fully the options that will be open to them. We are already seeking to do so. 
 We resist amendment No. 68, which would remove the provisions that permit the right to manage to be acquired for mixed-use properties where no more than 25 per cent of their space is in non-residential use. If we accepted certain other amendments that threshold would not be needed, but as we do not accept them, we need to retain it. 
 On that basis, I invite the hon. Member for Stone to withdraw the amendment.

William Cash: It does not sound to me as though the Minister is in any way likely to give way on the matter. She has made that clear and the Bill has been through many stages in the other place as well. We are up against it and we have no alternative but to divide the Committee. The Liberal Democrats may wish to say something about that, but I will leave that to them.

Alan Hurst: Are you seeking leave of the Committee to withdraw the amendment?

William Cash: No, certainly not; I wish to divide the Committee, but I am waiting to see whether the hon. Member for Torbay wants to say anything.
Mr. Sanders indicated dissent.

Alan Hurst: In that case, I will put the question.
 Question put, That the amendment be made:—
The Committee divided: Ayes 7, Noes 12.

Question accordingly negatived. 
 Clause 69 ordered to stand part of the Bill. 
 Clause 70 ordered to stand part of the Bill. 
 Schedule 6 agreed to.

Clause 71 - Miscellaneous enactments

William Cash: I beg to move amendment No. 48, in page 34, line 7, at end insert—
'(2A) The sum to which each member of an RTM company undertakes to contribute to the company's assets if it should be wound up whilst he is a member, or within one year after he ceases to be a member, for payment of the company's debts and liabilities contracted before he ceased to be a member, and of the costs, charges and expenses of winding up and for the adjustment of the rights of the contributories among themselves shall be the minimum sum, as defined in subsection (2B) below. 
 (2B) The minimum sum mentioned in subsection (2)(A) above shall be the following amount, namely the greater of— 
 (a) the total service charge and rent payable by tenants in respect of the premises in the two years prior to the acquisition date, or 
 (b) twice the average service charge and rent payable in respect of the premises in the five years prior to the acquisition date, 
 in each case divided by the number of members of the RTM company.'.
 Again, this matter was extensively discussed in the other place. It is important for the Committee to realise that an RTM company is a small business. Its business is the management of a block of flats. It is impossible for any business to run without adequate working capital. Let us imagine that some developers or builders are engaged to do some building work and, as often happens, the work turns out to be greater than was originally thought and the costs overrun the estimate. We are all familiar with that scenario. Personally, I have never come across an original estimate for a building contract that has not been totally inconsistent with the final bill. 
 Where will the RTM company get the money from to pay the excess amount? It will only have raised the money to pay the original sum by way of service charges. That is an important point, which I am sure the Committee will appreciate. Money cannot be raised from service charges at the drop of a hat. It is probably impossible and certainly unlikely that a bank would lend money, because the RTM company would have nothing to offer by way of security. We propose that RTM companies should have some share capital. 
 In the other place, the Minister, Lord Whitty, said: 
''I appreciate that the leaseholders company which takes over the management of the property needs to have access to funds''.
 The Government accepted in principle that RTM companies needed to have money. We seemed to be making some progress. However, nothing was done about the issue. Lord Whitty went on to say that acquiring share capital from the start 
''would price a lot of leaseholders out from the start and create far too great a threshold for them to pass through into the right-to-manage company.''—[Official Report, House of Lords, 27 February 2001; Vol. 622, c. CWH125.]
 We are not convinced by that, but I will wait to hear what the Minister has to say. That is the answer that we received in the other place, but it is not a proper one. If an RTM company needs money to operate, it needs it. Going through the motions and saying that such arrangements are difficult for the tenants is simply not good enough. The RTM companies run a great risk of failure unless they have adequate working capital. 
 Our proposal was meant to keep RTM companies as companies limited by guarantee, but with a substantial guarantee to be given by the tenants. Under the Bill, each member of an RTM company would have to contribute £1 to the company in the event of its being wound up. On that basis, the company would effectively be worthless. Under our proposals, the guarantee given by each tenant would be, in broad terms, the equivalent of two years' service charges. 
 The advantage of the proposal is that an RTM company would have some borrowing capacity from the start, so it would be able to obtain working capital from the bank, but the tenants would not have to part with the money at that time. I hope that the Minister will seriously consider the amendment.

Adrian Sanders: There is some merit in this amendment. It focuses on what could be a major problem for a group of tenants who formed a right-to-manage company. I am not sure whether it is the right solution, but I do not have an alternative proposal and I shall go along with the hon. Gentleman and treat it as the best that can be devised. The danger, as I mentioned before, concerns the barriers that already exist for people—particularly small groups—who combine to take responsibility for a company limited by guarantee. The amount of funds that they would need to gather would be an important consideration alongside their other responsibilities. I am reluctant to create further complications, but on the other hand, the hon. Gentleman has raised an important issue, which could set back some right-to-manage companies, particularly small ones, if they had financial difficulties.

Sally Keeble: Clearly, it would be important for right-to-manage companies to have ensured that they had made proper financial arrangements before embarking on work. We shall make it clear in guidance that they would have to have adequate funds before doing so. However, the need would depend on particular circumstances. Our objection to the amendment is that it would act simply as a barrier preventing a number of leaseholders from acquiring the right to manage.
 The right to manage is an important provision, which should provide an effective remedy for a number of leaseholders who want a major role in running their property. We see it as a solution that people might find preferable to enfranchisement. A number of leaseholders are concerned about the management of their properties. Often, in the first instance, they want the right to manage. However, the amendment would necessitate individual members 
 taking on a high minimum personal liability. The suggested formula would effectively price many leaseholders out of exercising the right to manage. 
 While I appreciate the good intentions behind the amendment—it is intended to ensure that the company has effective financial arrangements—the practical effect would be to make the right to manage inaccessible to the vast majority of leaseholders. That is contrary to our intentions. Where small leaseholders are concerned, an onerous burden would be the most unjustifiable barrier of all. The amendment would create an incentive for landlords to set the highest service charges possible. We cannot agree to the creation of such a glaring opportunity for landlords to undermine the right to manage. That said, I appreciate that leaseholders who take over the management of properties should have the necessary funds to be able to do the job properly. We agree and will strongly encourage them to do so in guidance; it is not a matter for the Bill. 
 Leaseholders already have to pay for the management of the property. They therefore exercise the right to manage knowing that they will have to meet that cost if they run it themselves. The additional requirement is an unnecessary and heavy burden. In many cases, the necessary funds will be available through the service charges and in the sinking funds. We are aware of at least one financial institution that is developing tailor-made packages to support resident management companies. On that basis, I ask that the amendment be withdrawn.

William Cash: I am afraid that I find the Minister's arguments unconvincing. This is an important issue and we shall press the amendment to a Division. I look to the Liberal Democrats for support and to see whether they have anything to say about our amendment and the Minister's reply.

Adrian Sanders: I was grateful for the Minister's reply. She is right that this provision could cause a further complication. However, she did not deal with the more serious point of what happens if a small RTM company gets into financial difficulties. That point overrides her argument about difficulty. On that basis, we shall support the amendment.
 Question put, That the amendment be made:—
The Committee divided: Ayes 7, Noes 12.

Question accordingly negatived. 
 Clause 71 ordered to stand part of the Bill.

Clause 72 - RTM companies: membership and regulations

Adrian Sanders: I beg to move amendment No. 7, in page 34, line 20, leave out from 'premises' to end of line 23.

Alan Hurst: With this it will be convenient to take the following amendments: No. 54, in page 34, line 23, at end insert
', and 
 (c) the holder of the freehold of the premises'
 No. 8, in page 34, line 23, at end insert 
'provided that those landlords reside on the premises'.
 No. 55, in page 34, line 26, at end insert— 
'(2A) Such regulations shall provide for the holder of the freehold of the premises to be able to appoint at least one director of the RTM company.'.

Adrian Sanders: The Bill contains proposals that give landlords an automatic right to be a member of a right-to-manage company. We believe that RTM companies should represent tenants and be able to deal at arm's length with the landlord. The clause brings the two together. We obviously accept that where the landlord is also an occupier of a flat it would reasonable for him or her to be a member of the RTM company. However, the automatic inclusion of the landlord gives an unjustified advantage, particularly to a non-resident landlord. Simply put, the amendment would deny the landlord that automatic right and discourage absentee, non-resident landlords from being fully participating members of an RTM company when the purpose of such companies is to be there for the tenants.

Sally Keeble: This group of amendments deals with the constitution of the RTM company. It is a question of dealing with conflicting and competing pressures. Amendment No. 7 provides that the landlord should not have the right to be a member of the RTM company. I understand that our proposed right for landlords to become members of the RTM company has been the subject of some dispute. I am also aware that leaseholder representatives have expressed concern about this matter. I am pleased that on this occasion the hon. Gentleman is championing some of the arguments that have been put forward by leaseholders.
 I appreciate that many of those concerns are genuine, but correspondence received by my officials on this issue suggests that many are based on a misunderstanding of what is being done in the Bill. I hope that it will help if I make our intentions clear. It is true that, in simple terms, the right to manage is the right to allow leaseholders of flats to gain management control of their block. I use the term leaseholders, rather than tenants. It is not a right simply to kick out the landlord as freeholder. We recognise that any member of an RTM company may wish to try to be obstructive and unhelpful. That must be taken into account in the overall right-to-manage framework. 
 We therefore intend to make voting rights in the company properly proportional to interest in the 
 property. That will prevent any obstructive minority from blocking the workings of the company. It is a no-fault right, which is particularly important. Our emphasis on no fault is not intended to be a convenient smokescreen for us to hide behind. The landlord will continue to have a legitimate property interest in the building while the right to manage is acquired. By the same token, the landlord will have an on-going interest in its management. Furthermore, because the acquisition of the right is not linked to any process of proving that the landlord has been a negligent manager—

William Cash: The Minister is not being specific. Will she confirm that the landlord would have no right to sit on the board and, in other words, would be excluded? The hon. Lady is not really addressing the point. She is telling us about his relationship with the management of the building. I am sure that she will accept that the idea of management carries with it responsibilities and the opportunity to be able to participate in board meetings.

Sally Keeble: I will certainly deal with some of those issues. I am dealing with the membership of the company, which is what the hon. Member for Torbay was dealing with.
 As this is a no-fault right, nothing justifies our ignoring the interests of the landlord and cutting him or her entirely out of the management process. The right to manage is not being organised because of failing, negligence or fault on the part of the landlord. The best way to safeguard the legitimate interests of the landlord is to allow the landlord to become a member of the right-to-manage company. That will put him or her on a similar footing to any one of the qualifying partners, with the same rights to receive information and to suggest the best way forward for the management of the property.

William Cash: Perhaps I am being unfair in not allowing the hon. Lady to finish her argument, but I am somewhat frustrated by the responses that are emerging. I was simply pointing out that a company of this sort is not as broadly based as a shareholder company. The Minister says that the landlord will be a member of the company, but is ignoring the fact that the board of directors will run the company. The ability to participate in management activities that she described is not adequate.

Sally Keeble: The hon. Gentleman is trying to pre-empt the structure of my speech and move on to the questions that he is concerned about, which are that the freeholder should be able to appoint one of the directors, or have some right to be a director. I am dealing with the membership of the company. Clearly, the directors will be elected by the members. In our proposals, the landlord has the right to be a member of the company on the same basis as any other qualifying leaseholder. There is a difference there, but I will return to the points that the hon. Gentleman made.
 I hope that I have dealt with some of the concerns about the exact role that the freeholder or landlord will play in the operation of the right-to-manage company and with any concerns that leaseholders 
 might have about that role and future arrangements for the building. 
 The best way to safeguard the landlord's interests is to allow him or her to be a member of the right-to-manage company. I suspect that that might be seen as somewhat heretical, but it would allow the landlord and the leaseholder to work together to manage the block in which they both have a property interest. Given the history of leaseholding, that view may seem heretical, but I am sure that in some instances there have not been the sorts of dispute between leaseholders and freeholders that have occurred elsewhere. The right to manage is a no-faults right, so there is no implication that there has been a history of bad relations between the two sides. 
 Amendment No. 8 allows resident landlords to be members of a right-to-manage company. Our view on this is governed by two principles. First, we cannot agree that different eligibility rules should apply to different people. There should be one governing criteria, namely, whether a person has a significant stake in the property in question. The Bill already enshrines that principle. Secondly, we are generally of the view that any form of residence test is undesirable. Hon. Members will know that we have dealt with that elsewhere in the Bill.

Adrian Sanders: My reading of the Bill is that a landlord with several blocks of flats could not be a member of several different companies at the same time and would therefore nominate someone to represent their interests as a member of the company. That is likely to be a common development. One thinks of a landlord as a small business person who owns a block. However, he or she could own substantial holdings and have to nominate people who would probably be professionals, or even, dare I say it, legal professionals, who are nominated to the companies from time to time.

Alan Hurst: Order. That intervention was too long.

Sally Keeble: One of the main issues about being a member of a company is the provision of information and access to it. That is an important aspect of giving the landlords or freeholders a right to membership of the company. I stress that that is membership, not directorship. The landlord's or freeholder's right is not a nomination right. As landlords will have the right to be a member of the company, they will know of the decisions that are taken at meetings. However, that right would not allow them to nominate someone to exercise it on their behalf.

Adrian Sanders: Could a landlord's nominee, as a member of the company, seek election to a board position in the company?

Sally Keeble: I said that the landlord could not nominate a representative. Most of the provisions for the leasehold arrangements are being made under the standard provisions of company law. Several amendments propose a departure from that law. The
 provisions of company law are appropriate. If they are not followed, problems may arise. I accept that any arrangement can run into difficulties. There are legal remedies and a well-established body of law and practice exists to deal with such problems.
 I will clarify the problem as that will help with some of the technical issues. It will be difficult to give a full answer to some of the technical legal questions, as that would involve drawing on an existing body of law that is affected by company law, which is a different statute. I will ensure that hon. Members receive a full explanation once we have given legal consideration to some of the questions raised. Although I have some knowledge of company law, I am not a qualified solicitor. Some queries can be dealt with, but where there is a need to examine company law, it will help hon. Members and the progress of the Committee to make that arrangement.

William Cash: I understand the Minister's remarks, but we run into a problem that has already cropped up in relation to commonhold. The Minister was not present at that debate, but she was on Second Reading. I suggested that regulations ought to be made available. The shorthand of regulations has been overlaid by the availability of draft documents to be made under the regulations, which are not the same. I have a letter here from the representative of the Lord Chancellor's Department, Mr. Paul Zimmerman—

Alan Hurst: Order. I am not certain that the reading of letters amounts to an intervention.

Sally Keeble: My point about the basis that will underpin our debates during the next two sittings was intended to assist the hon. Members for Torbay and for Stone.
 Experience has shown that residence tests are open to abuse because there is contention about what constitutes residence. The Bill removes or replaces residence tests and we would not favour creating another test. That is the correct approach. The right to manage is neither pro-landlord nor anti-landlord. It is a measure to ensure that management rights balance with property interests. As a holder of a stake in a property, the landlord is part of that interest. 
 The notion that the landlord cannot be trusted or might intimidate tenants underpinned the concerns of the hon. Member for Torbay. It is suggested that opposition to landlord membership is based on those presumptions, which is an unfair and inappropriate generalisation. The right is a no-fault right and its acquisition should not be tied to the previous conduct or predicted future conduct of the landlord. To suggest that a landlord cannot be trusted would pronounce that person guilty without any opportunity to prove otherwise. It also pre-supposes that all landlords are bad and all leaseholders are good and trustworthy.

Adrian Sanders: I did not mention the behaviour of landlords, but I understand where the Minister is coming from. It is unlikely that tenants would want to take over the management of a well-managed block. It is only in the event of poor management by a landlord that they are liable to want to form an RTM company. Therefore, guaranteeing the landlord an automatic
 place in the company would bring about the problems that people have raised in consultation.

Sally Keeble: That is a fair point. However, it makes a supposition about the reasons why people might want to exercise the right to manage. Many do so because they want to make decisions about their own properties.

William Cash: Before the Minister moves on, did she suggest that the fact that the landlord might be on the board would effectively act as a veto? She must understand that it would not get to that point: participation is not the same as veto.

Sally Keeble: I accept that point. I was not suggesting that a landlord who is a member of a company has a right of veto. Some leasehold organisations have suggested that the presence of a landlord as a member of a company might be intimidating.
 We are dealing with existing leasehold practice, where significant disputes between the two sides have arisen, so we have to reconcile different experiences and pressures. 
 Amendment No. 54 proposes that the freeholder should be given an unqualified right to become a member of the RTM company at any time. Members of the Committee will be aware that under clause 72(1)(b) the freeholder, together with any intermediate landlord, is already entitled to be a member of the RTM company. For the purposes of the clause, the freeholder will be the landlord of the qualifying tenants who exercise the right to manage. 
 The right granted to landlords under the clause is qualified in that a landlord may become a member of the RTM company only after the date on which that company acquires the right to manage the property. The qualification exists for a sensible, practical reason. Before it can acquire the right to manage, the RTM company is required to serve a claim notice on a range of existing management parties, including all the landlords. That allows the recipients to satisfy themselves that the leaseholders are properly entitled to the right to manage. 
 If landlords were also members of the company at this stage, they would be both the people who are being notified of a claim and a part of the body that notifies them, which does not make sense. Furthermore, it would give unscrupulous landlords a double opportunity to cause problems and delay. They could not only dispute the entitlement of the RTM company, but could slow the process down from within the company—an eventuality that we do not want. 
 For that reason, we cannot allow any of the landlords, including the freeholder, to become members of the RTM company before it acquires the right to manage. The Bill strikes a sensible balance in allowing landlords to protect their legitimate interests once the right is acquired, but preventing them from interfering before that date. That is the right solution. 
 Under amendment No. 55, the freeholder would have the right to appoint at least one director of the RTM company, which raises the difference between a member and a director. We believe that that provision 
 is neither necessary nor appropriate. The right to manage will give everyone with a significant stake in a property a balanced and proportionate say in its management. I see no reason to unbalance the position by giving landlords the right to insist on their own directors, who should be elected by members of the company. 
 Those proposals are based on the unhelpful assumption that leaseholders cannot be trusted to manage the property in which they have acquired the majority stake and that landlords need special protection. We disagree. Nothing justifies the landlord, with a minority stake in the property, having a disproportionate degree of protection. We agree that everyone with a stake in the property should be able to take action to protect their interest where the RTM company is failing to do its job, but the Bill already provides for that. Our view remains that such rights should be granted on a fair and equitable basis. 
 We have had a thorough debate and I have tried to make our position clear. I ask the hon. Member for Torbay to withdraw the amendment.

John Taylor: First, may I say how much I have enjoyed serving under your chairmanship for the first time, Mr. Hurst,. The tenor and tone of the Committee has been most agreeable.
 In common with the Minister, I have found it difficult always to hear what is being said. I hope that the Committee can hear me satisfactorily. The Minister did not quite catch the words of the hon. Member for Torbay, and neither did I. It may be the consequence of advancing years, but if it is not merely that could you, Mr. Hurst, use your good offices and influence to arrange for some ear trumpets to be distributed in the Committee? I complimented you on your chairmanship and they would be extremely valuable. 
 I want to reassure the Minister, although she is full of confidence and may not need it. At one stage, she admitted that she was not a qualified lawyer, but being a qualified lawyer is a profound disadvantage, although lawyers tend to get more fun out of these occasions, even though they keep it to themselves. There is not much rollicking hilarity; the pleasure is inward. It is a glow of self-satisfaction that, contrary to all precedents of the House of Commons, one finds oneself in the position of knowing about what one is discussing. That is normally ill-advised in the House and the silent ones—the Whips—normally ensure that Committees are selected so that no member knows what they are talking about. That gives the Minister an easy ride, which is what the Whips are all about. 
 The Minister seems to be bending over backwards to avoid being partisan in favour of the tenant against landlord. There is a traditional tension in the House that always presumed that the Tories were in favour of landlords and Labour in favour of tenants. There is a great anxiety in new Labour to get away from that past and in some senses that is admirable. However, there is a good reason for trapping the landlord in the management company, which is that the tenants can then intimidate the landlord. We did that in the 
 development in which I live in Solihull. We ensured that the landlord was a member of the management committee, so that he could not avoid hearing us let rip at him. 
 Finally, as I know that my interventions are normally unwanted in this Committee—[Hon. Members: ''Shame'']. Faint praise. The Minister said that she would be writing to the Committee on some technical points and I am sure that that is welcome. I believe that the proper convention is that the Minister should write to you, Mr. Hurst, because you are in charge and send copies to the rest of us. I remind her that her colleague, the Parliamentary Secretary, who was with us on Tuesday, undertook to write to me about the priority of the rights of the deserted spouse. I will not dig the ground again, but it is extremely important and we should not lose sight of it. I come to this Committee with two priorities. One is to ensure that the position of the deserted spouse is covered in rank priority to both arrears and a first or second mortgagee. The second, which we have not yet reached, is that I wish to secure in the Minister's mind the importance—

Alan Hurst: Order. If we have not yet reached the point in the Bill, it is not appropriate to pursue it.

John Taylor: I accept your guidance, Mr. Hurst. My intervention has lasted far too long and I thank you for the courtesy of your rebuke.

William Cash: I am glad that you have been complimented on your handling of the Committee, Mr. Hurst, and that the Minister had the opportunity to speak before me, because it allowed me to hear her arguments before I spoke. The more I heard, the less I liked.
 A curious situation is developing, which is that the landlord might be thought capable of intimidating the tenants. As my hon. Friend the Member for Solihull (Mr. Taylor) rightly said, in certain circumstances, it is not a question of intimidation. It is a question of participation in an important and complex process. Among other things, we are dealing with relationships between different people, some of whom may be downright difficult. My experience in dealing with such people is that they are difficult just for the sake of it. Equally, landlords can be difficult. 
 It may amaze the Committee to learn that difficult people who live in blocks of flats are not necessarily Conservative, Labour, new Labour, Liberal Democrat or anything else. They do not come from a particular political party; they are just plain difficult. We must get the balance right in the interests of the people who will live in such premises, to avoid what has, historically, been an arm's length relationship. The landlord has an interest and the tenants have an interest in what the landlord is thinking. 
 Those of us who watched ''Doctor Zhivago'' for the sixth time over Christmas may recall what happened when Zhivago returned. Just before Alec Guinness appears, we see an amazing sight: the Leninist committee has appropriated the property of Ralph Richardson, the father-in-law. The landlord is 
 excluded from the premises. He lives there, but the whole building has been taken over. I do not wish to carry this too far, but those who have seen the film may find the questions that it raises interesting.

John Taylor: On the subject of Alec Guinness, did the hon. Gentleman see ''The Bridge on the River Kwai?''

William Cash: I thought that it would be a good idea to watch both films, but we must return to the matter under consideration. I made the point, somewhat graphically, to demonstrate that we do not need to engage in confrontational situations of the Zhivago type, because the world has moved on. Excluding the landlord by law, which is what is being done, is carrying things too far.
 I do not know whether anyone in the Committee seriously believes that because a person has a substantial interest in property they should be specifically excluded. They are part of a process that should involve consultation—not necessarily a veto, as I said earlier—and the right to participate in the running of the company as a director. I do not see the virtue of excluding such people; it would be odd. The Minister may wish to reflect on that. 
 When I intervened earlier, the Chairman rightly pulled me up for going into detail about a letter, but I have more latitude when speaking to the amendment. We referred to the regulations. The Delegated Powers and Regulatory Reform Committee does not appear to have focused on the regulations relating to right-to-manage companies. I do not know whether that was an oversight or intentional, but the principle remains the same, and I should be grateful if the Minister would give it some thought. 
 Clause 72 is entitled 
''RTM companies: membership and regulations''.
 So many of the things to which the Minister referred will be worked out in the memorandum and articles of association of the RTM companies. That is where the balance lies between the various interests. 
 The clause states: 
''A provision of the memorandum or articles of a RTM company has no effect to the extent that it is inconsistent with the regulations.''
 I hope that hon. Members will forgive me, because I loathe going over the top on these matters but, rather like excluding the landlord, that absolute insistence on uniformity is going too far. We are saying what the template is, but we do not even know what the leasehold articles of association will contain.

Sally Keeble: If the hon. Gentleman wants to make points, I will deal with them when I reply.

William Cash: Certainly. Let me put it the other way round. Irrespective of Mr. Zimmerman's letter and the point that I made about commonhold, it would be helpful if the draft articles of association could be made available. At least then we would know where we were going on the matter, which would be a step in the right direction.
 My amendments are designed to tackle the problem of the landlord's status. The Government recognise 
 that the landlord will continue to have an interest in the building, as we have discussed. It is right for the landlord to have that involvement, but the way in which the Government recognise that right is—in my judgment—wrong. The Bill proposes that the landlord should be a member of the RTM company with one vote, but, as I have said several times because I feel quite strongly, he would have no right to sit on the board. If he was allowed to sit on the board but did not want to, that would be one thing, but he will be excluded, which is rather sinister. 
 I wish that a Labour Member would give an example or some reasoning as to why they think, in this day and age, that members of the new Labour party who are landlords—[Interruption.] I think that the Minister who attended a previous sitting declared an interest as a landlord of the sort of property that we are discussing. If I lived in that block of flats, I would like to have the Minister on the board because we have good personal relations.

Shona McIsaac: Will the hon. Gentleman give way?

William Cash: Of course. I am delighted to have sparked a response. It has been hard work: this is the third sitting.

Shona McIsaac: I have probably only just woken up.
 Given that one of the biggest landlords in the country is the Duke of Westminster, will the hon. Gentleman estimate how much time that that landlord would have to spend attending myriad management meetings? Frankly, he would have to invent time travel to be able to attend them.

William Cash: First, no one imagines that the word ''landlord'' necessarily means the landlord himself. It could be a representative and I do not believe that there is the slightest doubt about that. The important point is that in a smaller block of flats it would almost certainly be the landlord, because there would be a personal relationship of the sort that I described. That does not alter my argument about the necessity of avoiding the difficulties that arise when there is a clash of personalities or interests and the landlord is actively excluded. We are not talking about the Duke of Westminster in this context.

Bill Wiggin: Having listened to the Minister and other members of the Committee, it is clear that the essence of the reform of leasehold is balance. The Bill should not focus solely on the Duke of Westminster who is just one landlord, but there is no reason why the Duke of Westminster should not turn up to a meeting if he wished to do so. He should not be excluded and the purpose of the amendment is to prevent him from being excluded. We are all concerned that the leasehold reform should not be seen as a way of pushing the freeholder out of that committee.

William Cash: That is right. There are boards of directors in so many walks of life. That does not mean that every director must turn up on every occasion. It may be appropriate for him to turn up
 only once in a blue moon when his interests and what is going on with his block of flats demand it. I in no way decry the intervention of the hon. Member for Cleethorpes (Shona McIsaac). I do not blame her for having a shot at whomever she wanted to have a shot at.

Shona McIsaac: It was you, actually.

William Cash: In that case, it was wide of the mark. By no stretch of the imagination am I the Duke of Westminster.

Julian Lewis: But you deserve to be.

William Cash: That is another story.
 I do not see why a person should be excluded, and I am astonished that not one member of the Government is prepared to acknowledge that the policy of exclusion is unjustified or is prepared even to justify it. The Minister has not justified it. However, the only proper way to recognise the landlord's legitimate interest is to allow him to sit on the board of directors. The extent of his right would be no more than to attend the general meetings and, if the circumstances were such, to be outvoted on the board by the tenant members every time, as I pointed out earlier. It does not follow because the landlord is on the board that he will win the votes or exercise any control or intimidation. 
 I mentioned the veto earlier. If the landlord tried to pursue interests that were inimical to the interests of the tenants, he would be outvoted. I am worried for new Labour, because there is a Stalinism here. I find it peculiar and do not understand it. The amendment is important in many ways for that reason. The landlord should be allowed to sit on the board of directors, especially if the Government persist in their avowed intention to allow buildings with commercial premises to be made subject to the residential tenants' right to manage. The landlord should be allowed some input into the management if he so wishes. The landlord may not be interested in being a director, particularly where there are long leases with substantial periods to run before expiry. If the reversion is to fall in the near future it must be right to give the landlord the opportunity to take part in the decision-making process. I do not understand the reason for the omission in the Bill.

Sally Keeble: I am grateful to the hon. Gentleman for raising those points. I should have waited to hear them first. I am sure that he will be relieved to hear that I do not intend to go back over my speaking notes, which I should have read out at the end. May I also apologise to the Committee? I should have declared my interest when I first spoke. My husband and I live in a house in London that is a leasehold property.

William Cash: I think that we all do.

Sally Keeble: I am sure that we virtually all do.
 In the context of these discussions I should also declare a formal interest in that as a leaseholder I enfranchised myself, along with other leaseholders. I have been through quite a lot of the process that we are talking about. [Interruption.] I gather that other hon. Members have too. 
 I am grateful to the hon. Member for Solihull (Mr. Taylor) for his advice on lawyers. We clearly want arrangements for the ownership and management of properties that will work to the benefit of all the parties involved. The right to manage will probably be more immediately attractive to leaseholders because it will provide them with a degree of involvement that they have not had previously, without having to go for enfranchisement, which they might not want to do for a variety of reasons. However, that does not mean that it has to be seen in a confrontational way. I completely take the point that Opposition Members have made. That approach underpins the fact that this is a no-fault right. I have spoken about that quite often and so I will not go into it in great detail again. 
 The hon. Member for Solihull gave an interesting explanation of how the management committee of his property pinned the landlord down. In this instance we are dealing with a slightly different arrangement because it is a company. The members can elect as their directors people from among their membership. I will return to that when I deal with the arguments of the hon. Member for Stone. His main thrust was that he sensed that the landlords were being excluded. Further explanation is needed. I completely take the points made by the hon. Member for Solihull about the deserted spouse. I am sure that he will get a full response. I will ensure that our officials also look at the leasehold side. 
 The hon. Member for Stone pointed out that it is a two-way relationship. That is right. It is part of the principle underpinning the no-fault right to manage. It is a new and important right that will address many of the concerns that have been raised. The fact that people thought that it was all or nothing encouraged a more antagonistic approach between freeholders and leaseholders on decisions about companies. This no-fault right to manage is important progress. 
 The hon. Gentleman also asked about the constitution and regulations. We recognise that the constitutional right to manage a company is a fundamental part of the framework that the Bill puts in place. It is important that these matters are subject to careful consideration. We consider that that is best served by the Bill's approach, which will allow us to work out the constitutions in detail after consultation with the interested parties before carrying out a wider public consultation on the draft regulations. The work is under way and, expecting great interest in the matter, I asked the officials to bring the drafts to the Committee. The usual protocol is that we ask your permission to circulate them, Mr. Hurst. If you agree, perhaps they can be distributed when we break for lunch. I emphasise that the documents are drafts and I welcome comments on them from hon. Members or as part of the consultation exercise to be carried out later in the year.

William Cash: I am grateful to the Minister for acceding to my request. I do not mean to be curmudgeonly, but we should look back a little. The Bill has been through five stages in the other place where such matters have been considered exhaustively, and has had a Second
 Reading in the House. I mentioned what the Deregulation and Regulatory Reform Committee said on the matter with the Parliamentary Secretary, Lord Chancellor's Department, who was surprised that the regulations had not been produced. We are now being offered, not the regulations that that Committee said should be made available, but drafts based on those regulations. We have now reached the part of the Bill that deals with the question relating to—

Alan Hurst: Order. If the hon. Gentleman wishes to speak to that amendment he must do so after the Minister, not during her speech.

William Cash: I should be happy to do so, Mr. Hurst, as I want to continue the argument, but I could bring what I want to say to a close very rapidly. It is cutting it a bit fine to let us have the regulations just before Report, when the opportunity to make amendments will have passed. I could wrap that into a point of order if you wish, Mr. Hurst.

Sally Keeble: These are drafts of the proposals for the constitution of the RTM company that would normally go through a long process of consultation—

William Cash: It is in the Bill.

Sally Keeble: The hon. Gentleman is trying to make a meal out of a reasonably straightforward point. Realising that there would be interest in the matter, I have ensured that drafts—they are no more than that—are available and they can be seen. The regulations that the hon. Gentleman asked for prior to this sitting—he spoke to me outside the Committee Room—were provided, although admittedly just before the sitting. I am making a genuine offer to ensure that hon. Members get full information and can see the draft constitution at an early stage so that they can take part in a process that will continue long after these proceedings have finished, because there must be proper consultation with the interested parties. It is up to the hon. Gentleman, but I am making a genuine offer to be helpful.
 The thrust of the hon. Gentleman's argument is the unfair exclusion of the landlord and I have difficulty seeing how the proposal would work. The amendment states: 
''Such regulations shall provide for the holder of the freehold of the premises to be able to appoint at least one director of the RTM company''.
 There is clearly a difference between a member and a director and we argue that the freeholder, as someone with a proper interest in the property, should be entitled to be a member of the right-to-manage company and have all the benefits of membership, which include receiving information and, elsewhere in the Bill, the ability to challenge decisions that the directors make. 
 As I have said, a number of measures in the Bill are intended to reconcile different views and competing pressures and priorities. Some people on the leaseholder side of the argument do not think that the freeholder should have the right even to be a member of the company. That argument is not sound 
 because the freeholder has an interest in the property and that should be properly recognised. 
 In addition, this is a no-fault right and, as Opposition Members have consistently argued, including the hon. Member for Torbay, it is in everyone's best interests that the right-to-manage company works in an amicable fashion. We should not have this constant argument between who is a freeholder and who is a leaseholder. There are sharp differences of interest, but to all intents and purposes, the interests of both freeholders and leaseholders should in most cases be the proper management of the company and the building in which they have interests and investments. 
 It is simply not the case that the freeholder is being excluded by our proposals. We are not saying that the freeholder should have any rights, in terms of board membership, over and above all of the other people who have an interest in the building. It seems to be perfectly fair that the members of the company should elect the directors they want. That matter should be entirely determined by the members of the company. It would be wrong to say that one member should have superior rights to others. 
 We recognise the property rights of the freeholder. Those people who are totally opposed to the leasehold system would not want us to recognise those rights. The way properly to recognise them is to put them on the same footing as every other person with an interest in the premises, which is to be a member of the company. 
 Clearly, there is an option for members to stand for the board of directors. When a landlord has an interest in a large number of properties, it will not be practical for him or her to be on the board of directors of every single property that has set up a right-to-manage company. They will certainly not be excluded, however, from company membership. 
 I assure the right hon. Gentleman that his fears are not borne out by the provision in the Bill, which strikes the right balance between the need to respect the property interests of everyone who is involved and provide for the proper arrangements for the property concerned. On that basis, although I suspect there will be further discussion about this matter, I ask the hon. Gentleman to withdraw the amendments. 
Mr. Taylor rose—

William Cash: I would be happy to allow my hon. Friend the opportunity to go first, if that is convenient.

John Taylor: I am grateful to my hon. Friend. In her perfectly proper and appropriate declaration of interest, the Minister said that she and her husband had enfranchised, what I assumed to be a leasehold house and that they had acquired the freehold reversion. I can tell from her body language that I am mistaken in that, but I would like to leave a question with her. This is really an exercise in impertinence, and she does not have to answer, but I would be interested to know whether the Minister and her husband in acquiring their freehold reversion, enjoyed the benefit of certainty of valuation. The
 Committee will know that that is one of the directions—

Sally Keeble: I shall stop any speculation: we are currently leaseholders. I was referring to a flat that I had owned previously.

John Taylor: So the Minister, in a previous existence, acquired the reversion on a flat. I would like to leave her with this impertinent and pertinent question. Did she enjoy certainty of valuation or did she start off miles away from the figure required for reversion? The Committee will realise that I am interested in certainty of valuation. When the Minister's officials inquire into the rights of the deserted spouse, about which I am concerned, they may want to know that the seminal case was Bendall vs McWhirter. It was taken to its groundbreaking conclusion by a brilliant firm of solicitors in the west midlands, which employed me.

Andrew Selous: Does the Minister agree that my hon. Friend the Member for Stone tabled the amendment to allow ease of communication? It is easier for leaseholders to communicate with the freeholder at a directors meeting, if the freeholder can be present. Otherwise, if the board of directors and the freeholder disagree, they will have to engage in correspondence, further meetings and so on. As my hon. Friend the Member for Solihull commented, where meetings have taken place and the freeholder was present, it was easier to thrash such matters out.

William Cash: The reference to McWhirter made me wonder whether it was anything to do with the distinguished founder of the Freedom Association. Perhaps some people have to learn important lessons about the exercise of freedom. That takes me to the Human Rights Act 1998. The Minister has certified compatibility with the convention on human rights at the beginning of the Bill. I notice that Government Members have suddenly acquired that alert expression that I usually associate with the fact that the buzzers on their controllers are going. For any Conservative Member to mention human rights is regarded by Labour Members as close to treason. In fact, the Human Rights Act 1998 has clear provision on property rights and I would be surprised if no one raised that question in relation to the explicit exclusion of the freeholder.
 We do not regard the function of the landlord in the historical sense with which the Duke of Westminster was raised. We recognise the importance of the tenant. In my own family, a Member of Parliament in the 1840s was the secretary of the tenants' rights association in Ireland. One cannot get more closely related to tenants' rights than that. Anyone who cares to look up what Mr. Lucas's functions were at that time and the battles in which he had to engage on behalf of the Irish tenants would understand where I am coming from. It is not only a question of landlord and tenant; it is a question of the balance that must be struck in communication and the interests of everyone. 
 The Minister question protested that the landlord could be outvoted if he was on the board. It will be difficult to see to what extent the proposals in the draft documents that she made available mesh into her arguments, although it may not be as difficult if we 
 manage to accelerate our consideration of the provisions. She will know that, when it comes to the crunch these days, the courts can interpret what a Minister says in the House. That is an onerous responsibility, which can cause some difficulty. Unnecessary uncertainty could arise in relation to the provisions if the Committee has not had the opportunity at the right time to evaluate the regulations and their interaction with the Minister's remarks or the interpretation of the intention behind those remarks. 
 I hope that we can return to the issue on Report or pursue it in some other way. We have debated it at length, and I hope that you have not found it uninteresting, Mr. Hurst. There are some important questions about attitudes and culture, as well as practicalities. We intend to press the matter to a vote.

Adrian Sanders: When I moved amendment No. 7, I thought the discussion would be short and sweet. I did not realise that it would develop into such a wide-ranging debate on issues such as ear trumpets, the films of David Lean and Obi-Wan Kinobe—perhaps Sir Alec Guiness's best role—in Star Wars.
 I presume that I may withdraw my amendment while allowing the amendment tabled by the hon. Member for Stone (Mr. Cash) to be pressed to a vote? I listened carefully to the Minister and I accept what she said. Our concern is that people will want to move to the right to manage because of a bad experience with a landlord. The Minister believes that some people may take advantage of that. She may be right, but it remains to be seen. As things stand, the greatest incentive to want to exercise the right to manage would be a bad experience with a landlord and the desire to be distanced from that landlord once the right-to-manage company was set up. It has been a fascinating debate. 
 I beg to ask leave to withdraw the amendment.

Hon. Members: No.
 Amendment proposed: No. 7, in page 34, line 20, leave out from 'premises' to end of line 23.—[Mr. Sanders.] 
 Question put, That the amendment be made.
The Committee divided: Ayes 5, Noes 14.

Question accordingly negatived. 
 Amendment proposed: No. 54, in page 34, line 23, at end insert 
', and 
 (c) the holder of the freehold of the premises'.—[Mr. Cash.]
 Question put, That the amendment be made:—
The Committee divided: Ayes 5, Noes 14.

Question accordingly negatived.

Alan Hurst: The Committee has divided on the hon. Member for Torbay's amendment No. 7. The hon. Member for Stone asked that his amendment No. 54 be put, to which I acceded, and we divided on it. I believe that he now wishes to move amendment No. 55.
 Amendment proposed: No. 55, in page 34, line 26, at end insert— 
'(2A) Such regulations shall provide for the holder of the freehold of the premises to be able to appoint at least one director of the RTM company.'.—[Mr. Cash.]
 Question put, That the amendment be made:—
 The Committee divided: Ayes 5, Noes 14.

Question accordingly negatived. 
 Clause 72 ordered to stand part of the Bill.

Clause 73 - Qualifying tenants

Adrian Sanders: I beg to move amendment No. 9, in page 35, line 17, at end insert—
'(8) Where the tenancy of a flat under a long lease is assigned, the assignee shall become the qualifying tenant for the purposes of this section.'.
 I am extremely reluctant to say that this will not take long. I am going to be brief once again, but I have no idea whether the rest of the Committee will follow suit. This is a probing amendment to establish the Government's position. We welcome the extension of the right of collective enfranchisement to several leaseholders who previously did not have it. One defect remains, but the Minister may be able to put us right about it. 
 The Bill does not require the automatic transfer of membership of a right-to- enfranchise company on the 
 assignment of a lease. The central purpose of a right-to enfranchise company is to give leaseholders the right to participate in ownership. We view the concept of an RTE as an embryonic commonhold association. Do the Government share that view?

Sally Keeble: We are talking about right-to-manage companies at this stage.

Adrian Sanders: In that case, the amendment obviously deals with the wrong part of the Bill. I beg to ask leave to withdraw the amendment.
 Amendment, by leave, withdrawn. 
 Question proposed, That the clause stand part of the Bill.

Sally Keeble: When I explained that we were using company law, some hon. Members may have wondered what I was talking about. Now they can see the point. The right-to-manage company falls under the ambit of company law, so a person becomes a member of a company, enters into a contract and agrees to be bound by the provisions of the memorandum and articles of association. In an RTM company the assignee does not acquire a share, but becomes a guarantor. The law requires that the person must formally agree to that. It is not right to force people to become members of a company in the way suggested by the hon. Member for Torbay. The usual provisions of company law should apply.

William Cash: There is a slight problem, but it will be ironed out as people become familiar with companies limited by guarantee. It is easy for people to imagine a company as a company, but a company limited by guarantee—as the Railtrack experience well
 illustrates—is different in respect of management and control. Also, there is a different shareholder relationship to that in a normal company. People should not be deluded into believing that the proprietorial right that develops out ownership in a normal company applies to a company limited by guarantee. They would be sadly mistaken if they believed that the two sorts of company were the same, which is an important point about the framework. It will certainly be interesting to see precisely what the drafts say about the constitution, memorandum and articles of association.

Sally Keeble: I do not want to detain the Committee. To be helpful, I note the remarks of the hon. Member for Stone.
 Question put and agreed to. 
 Clause 73 ordered to stand part of the Bill.

Alan Hurst: I have an announcement. An application has been made to move the Committee to another Room because we are so cramped here. Investigations have taken place, but proved unsuccessful. The Committee will have to continue to sit in this Room for the duration of the Bill.

John Taylor: On a point of order, Mr. Hurst. Will it be convenient for us to leave our papers here until this afternoon?

Alan Hurst: Yes, the Room will be secure.
 It being twenty-five minutes past Eleven o'clock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order. 
 Adjourned till this day at half-past Two o'clock.